Domestic new drugs are sweeping the European and American markets, but it is also expected that China will have its own trading "internal circulation" ecosystem | 36Kr Interview

In 2024, the competition point in the biomedical field has finally reached the once "undruggable targets".

Several innovators in the pharmaceutical industry who have facilitated large-scale outbound licensing (BD) collaborations this year have sensed that currently, compared to the past stage of following homogeneous drugs, the product types that "technological breakthroughs drive market breakthroughs" are gradually increasing. For example, the previous "weight loss miracle drug" GLP-1, the β-amyloid plaque research in the field of Alzheimer's, as well as the currently popular new drug molecules such as TCE bispecific antibodies and KRAS targets.

At the beginning of this year, when looking forward to the future development of the domestic medical industry, Wang Yinxiang, the Chairman and CEO of Jacobiopharmaceuticals (01167.HK), had predicted this trend. In his view, this will also become the "key for Chinese innovative pharmaceutical companies to compete on the same stage with overseas enterprises".

At the end of September, Jacobiopharmaceuticals announced that it had received a 173 million yuan down payment and other payments from its partner Allist Pharmaceuticals (SH: 688578) for the two licensed pipelines, KRAS G12C inhibitor Gorelaisai and SHP2 inhibitor JAB-3312. This collaboration only involves the rights and interests in the Chinese region, but The total price is nearly 1 billion yuan, making it the highest amount in the existing KRAS product transactions in China.

As the prediction gradually becomes a reality, we took this opportunity to revisit Wang Yinxiang again: Why would a mature product about to be launched choose the BD cooperation model? When Chinese innovative pharmaceutical companies are enthusiastically choosing to go global, will selling the rights and interests in the Chinese region at a good price become the key to the next authorization? When two enterprises that excel in R&D and sales respectively cooperate, what kind of adjustments will they experience?

These experiences may be of certain reference value to the successors who are currently or about to engage in BD cooperation.

BD or CSO, This is a Question

This year, BD-form collaborations are more reflected in the pipelines at the preclinical or early clinical stages. For products like Gorelaisai that are already ready for market launch, the more traditional approach in the pharmaceutical industry is to directly adopt the general distribution (CSO) model, build a certain sales team, and retain the product rights and interests.

Why didn't Jacobiopharmaceuticals do this?

Wang Yinxiang explained that when preparing for commercialization at the beginning of this year, both models were indeed being discussed with partners, but from the perspective of supplementing cash flow and maintaining the subsequent product development, BD "might be more suitable for us".

Currently, Gorelaisai and JAB-3312 are in the late-stage development phase, and the subsequent three registration clinical trials involve multiple large tumor types such as lung cancer, pancreatic cancer, and colorectal cancer, requiring the enrollment of seven to eight hundred patients. It is understood that The clinical trial cost for each tumor patient in China is about 300,000 - 600,000 yuan, and it is estimated that the cost of this trial is about 500 - 600 million yuan, "simultaneously carrying out multiple projects will be very stressful". In addition, the CSO cooperation also means that Jacobiopharmaceuticals itself cannot avoid the large and expensive production investment in the future.

However, in the BD cooperation model, the subsequent registration clinical and other issues of the two products can be transferred to the partner Allist Pharmaceuticals; at the same time, with the supplementation of cash such as the down payment, Jacobiopharmaceuticals can also focus on the subsequent important product development.

In fact, KRAS is a product that has just started globally. Currently, only three first-generation KRAS G12C products are on the market, but this is only one subtype of KRAS mutations, accounting for only about 13% of the patient population, with a relatively small market size and mediocre sales performance.

Research and development situation of KRAS targets (Source: Yaorongyun Database)

From the perspective of R&D, exploring the possibility of subsequent iterative products, such as developing other KRAS subtypes with a higher proportion, such as G12D (about 35%) and G12V (about 29%), or simultaneously laying out the development direction of Pan-KRAS that can cover more mutation types, has also been included in the plans of more enterprises.

It is reported that the current product development focus of Jacobiopharmaceuticals can be summarized as "one hot and one cold". The popular pipeline refers to the KRAS and STING-related pipelines, and Jacobiopharmaceuticals will prioritize the allocation of resources to these two types of projects. Wang Yinxiang believes that the R&D of the KRAS-related pipeline has just begun, just like the first-generation EGFR inhibitor was launched in 2002, and 20 years later, there are still pharmaceutical companies researching the fourth-generation EGFR. After the launch of KRAS G12C, the industry will study the drug resistance mechanism and continue to develop KRAS G12D, Pan-KRAS and other projects.

STING is the "most exciting tumor immunotherapy drug in the post-PD-1 era" in Wang Yinxiang's eyes. Jacobiopharmaceuticals is developing an iADC project with STING as the payload, attempting to solve the problem that nearly 70% of solid tumor patients do not respond to the PD-1 monotherapy in the clinic.

For Gorelaisai and JAB-3312, for which the Chinese rights and interests have already been BD'ed, Jacobiopharmaceuticals itself will focus on promoting overseas clinical trials. The first is first-line non-small cell lung cancer. Currently, only the second-line non-small cell lung cancer indication of the KRAS G12C inhibitor has been approved. Jacobiopharmaceuticals is communicating with the FDA and EMA to carry out the registration clinical trial of first-line non-small cell lung cancer. The first-line strategy of overseas pharmaceutical companies is to combine KRAS G12C with chemotherapy or/and PD-1, while Jacobiopharmaceuticals chooses to combine with SHP2, believing that "the double oral drugs have more compliance advantages than intravenous injection".

Pancreatic cancer and pan-cancer are also key layouts for overseas clinical trials. On the one hand, Jacobiopharmaceuticals is the only enterprise globally that has been approved to carry out the registration clinical of pancreatic cancer, with a relatively obvious first-mover advantage; on the other hand, these trials require a small number of patient enrollments, low costs, and pancreatic cancer has obtained the orphan drug certification from the US FDA.

In addition, another line of the company's layout is the "less popular targets". Including BET inhibitor (JAB-8263), Aurora A inhibitor (JAB-2485), Lif monoclonal antibody (JAB-BX300), etc. "These projects are relatively unpopular, and few enterprises layout them. Therefore, the competitive advantage of the project is obvious, and the progress is among the top three globally. We can find biomarkers through translational medical research to find the patient groups that can benefit from it."

As of the end of 2023, Jacobiopharmaceuticals has about 1.2 billion yuan in cash reserves. Wang Yinxiang introduced that According to this plan, in the worst case where "not a penny comes in anymore in the future", Jacobiopharmaceuticals' own funds are sufficient to maintain operation for 3 - 4 years, and in addition, the subsequent payments from the cooperation with Allist Pharmaceuticals will be received to supplement the cash flow. The company expects that the secondary market will gradually recover during this process, so as to conduct some financing; at the same time, other BD projects are also being prepared. "For example, two or three years ago, there were actually enterprises waiting for the data of our Pan KRAS."

Regarding whether the authorization price in the Chinese region will indirectly affect the overseas rights and interests, Wang Yinxiang believes that "if the domestic transaction price is significantly higher than other projects of the same target, it will have a positive impact on the overseas transaction. Especially Allist Pharmaceuticals has obvious advantages in the field of lung cancer, which is more helpful for endorsing the project.". In addition, the scale of the patient population and the competition situation in the overseas market are also important evaluation dimensions.

Although It's a Business Negotiation,

The "Face-to-Face" Feeling is Also Very Important

In around April and May this year, the teams of Jacobiopharmaceuticals and Allist Pharmaceuticals met offline for the first time, and the communication between the two sides also moved from "the exchange of basic data to the formal negotiation".

"The transaction of late-stage projects is very complicated. We usually export all the data to a data room first. The teams of the other party involved in the review include many departments such as patents, API (generally referring to the active ingredients in the preparation), quality control, clinical, and finance. Therefore, in order to promote it as soon as possible, after several rounds in the process of signing the TS, everyone will first build a transaction framework, put aside the controversial clauses, and focus on determining the cooperation form, the down payment and milestone payment, and the sales sharing ratio, and then proceed with the due diligence."

The "veterans" of the negotiation understand that TS is a business gentleman's agreement without legal effect. Although in most cases everyone will follow it, it is difficult to define some relatively detailed contents in this link.

So, which clauses can be put aside? It can be divided into two types. Firstly, the "unoccurred situations" in product development; and a large number of "trivial issues that require the intervention of lawyers" in the process can also be discussed later.

"There are too many details, and some I can't even remember. Often a meeting lasts for several hours and goes through several rounds." Wang Yinxiang said with a smile.

In the long execution process of a transaction, we have heard many means used to achieve the interests, which are somewhat worldly. But more often, in these situations where there is no right or wrong, only positions, the method to balance the differences is very straightforward: Each takes a step back and seeks common ground while reserving differences.

After several months of negotiations, the cooperation between Jacobiopharmaceuticals and Allist Pharmaceuticals was finally officially announced at the end of August this year. When talking about the gains during the process, Wang Yinxiang did not talk too much about the methodology-related content, but mentioned that "in business negotiations, the sense of trust in face-to-face is very important".

He admitted that the teams of Jacobiopharmaceuticals and Allist Pharmaceuticals have many similarities, such as both having overseas work and life experiences, a background in multinational pharmaceutical companies, being very academic and professional. "When everyone has a common experience, the views and thinking methods on many issues will be more in line, and the styles will also be similar."

We asked Wang Yinxiang where this style similarity might be reflected. He thought for a moment and replied: "It's not that kind - on the wine table, let's drink!"

Outbound Licensing is Becoming the Norm,

The BD Internal Circulation of Domestic Pharmaceutical Companies May Be the Next Trend

In the case where the capital market in the biomedical field has not yet recovered, the outbound BD product pipelines and rapid monetization of innovative pharmaceutical companies have become an unspoken "financing" method in the industry. At the same time, combined with the "shrinkage" of the market brought about by changes in domestic policies, the imagination space and survival possibility of seeking overseas authorization from multinational pharmaceutical companies are obviously more attractive, which is also one of the reasons why cross-border authorization projects are far ahead this year.

In Wang Yinxiang's view, this phenomenon that Chinese pharmaceutical companies are gradually participating in the overseas innovative drug trading is becoming the norm, essentially because the quality of new drug products in China is gradually getting rid of the past homogeneous competition and moving towards the direction of first in class and best in class.

But the next problem that follows is that "we are participating in the innovative drug trading circles in the United States and Europe, but between China's Pharma and Biotech, such an ecosystem has not yet been formed".

In this regard, the data evidence is more intuitive. According to incomplete statistics by 36Kr, As of the end of September, there are approximately 135 BD transactions in the domestic innovative drug field this year, of which the cross-border authorization projects going overseas and the domestic transaction projects are 65 and 47 respectively. The number of cooperations reached between domestic pharmaceutical companies is still relatively small, and the rights and interests are mostly limited within the Chinese market.

The reason for this points to an old problem, that is, the Chinese market is limited, and Chinese pharmaceutical companies basically do not have the ability to sell innovative drugs in the overseas market, so "they cannot obtain global rights and interests". But Wang Yinxiang judges that as some large enterprises have begun to explore the layout of overseas sales networks, this may become the next development direction of domestic innovative drug BD.

In addition, for the currently highly concerned NewCo going overseas, Wang Yinxiang believes that this is a reasonable approach. Because new drug projects are time-sensitive, but many innovative pharmaceutical companies currently actually cannot conduct financing on the basis of the parent company. Stripping off a certain asset can at least ensure that the project can be pushed forward with external funds, "otherwise it will depreciate".